The U.S. District Court for the Eastern District of Missouri has ruled in favor of the defendants in an Employee Retirement Income Security Act lawsuit filed against the Olin Corp.
The plaintiffs in the case put forward substantially similar allegations to numerous other lawsuits filed against employers for alleged fiduciary breaches in the operation of their defined contribution retirement plans. As in many of the prior suits, the plaintiffs in this matter are represented by the law firm Capozzi Adler, among other counsel.
The plaintiffs alleged that, during the proposed class period, the fiduciary defendants failed to adequately monitor and control the plan’s recordkeeping costs and failed to objectively and adequately review the plan’s investment portfolio with due care to ensure that each investment option was prudent, in terms of cost and performance. The complaint also suggested the plan fiduciaries maintained funds in the plan despite the availability of similar investment options with lower costs and superior performance. As recounted in the text of the ruling, the plaintiffs estimated that the defendants’ allegedly unlawful conduct cost the plan millions of dollars.
In response to the complaint, the defendants moved for outright dismissal, arguing that the lead plaintiffs did not allege “meaningful benchmarks” against which to evaluate the defendant’s fiduciary process and did not allege facts supporting an inference that they, as defendants, had breached their fiduciary duties.
As the ruling states, when considering a motion to dismiss, a court must “liberally construe a complaint in favor of the plaintiff.” However, if a claim fails to allege one of the elements necessary to recover on a legal theory, the court in question must dismiss that claim for failure to state a claim upon which relief can be granted.
“Threadbare recitals of a cause of action, supported by mere conclusory statements, do not suffice,” the ruling states. “Although courts must accept all factual allegations as true, they are not bound to take as true a legal conclusion couched as a factual allegation.”
In their dismissal motion, the fiduciary defendants argued that the allegations fail to state a breach-of-fiduciary-duty claim. First, the committee argued that revenue sharing does not imply imprudence, and second, that the survey data provided as a suggested cost/performance benchmark is not a meaningful benchmark. Third, the defense argued that the authorities on which the lead plaintiffs rely to establish a $35 recordkeeping-fee average likewise fail as an apt comparison. And finally, the committee urged the District Court to reject as the basis for a claim the plaintiffs’ “speculation” that the committee fails to conduct periodic requests for proposal.
“Ultimately, the investment committee says that the lead plaintiffs fail to identify any flaw in Olin’s decisionmaking process that would allow the District Court to infer misconduct,” the decision states. “The District Court agrees with the investment committee.”
As stated in the ruling, the plaintiffs in fact acknowledge that “a revenue sharing approach is not imprudent per se.” To the contrary, the ruling states, revenue sharing is a “common and acceptable investment industry practice that frequently inures to the benefit of ERISA plans.”
The ruling further points out that courts throughout the country have routinely rejected the 2019 NEPC survey cited by plaintiffs as a sound basis for comparison, because it lacks in detail.
“To plead a meaningful benchmark, the plaintiff must plead that the administrative fees are excessive in relation to the specific services the recordkeeper provided to the specific plan at issue,” the ruling states. “The 2019 NEPC survey does not contain any information about the services provided to the surveyed plans. Thus, the amended complaint contains an incongruent comparison. The survey considered the recordkeeping, trust and custody fees charged by a limited sample of investment plans of various types and sizes without spelling out, in any degree of detail, the services the plans received in return.”
For this reason, the ruling concludes, the District Court need not accept as true the plaintiff’s legal conclusion that the survey serves as a meaningful benchmark against which to weigh the investment committee’s actions.
The plaintiffs’ arguments about investment fees meet a similar fate.
“Plaintiffs [suggest] that determining whether the ICI [investment fee] data suffices as a benchmark impermissibly drags the District Court into the factual weeds,” the ruling states. “Once more, we reject this argument. Just like the consideration of the NEPC survey above, at this stage, the District Court accepts as true the ICI’s findings as alleged, yet it need not accept as true the plaintiffs’ legal conclusion that the survey serves as a meaningful benchmark against which to weigh the investment committee’s actions.
“Plaintiffs come closer, but ultimately fail to successfully allege that the defendants could not have engaged in a prudent process with their bare allegation that the plan maintained several T. Rowe Price mutual funds despite the availability of cheaper, collective trust versions of the funds (which the plan eventually switched to),” the ruling continues. “Without more, courts routinely find that collective trusts are not meaningful comparators to mutual funds because collective trusts are subject to unique regulatory and transparency features that make a meaningful comparison impossible.”
The full text of the ruling is available here.